The sell-off in emerging market currencies halted, and with
that, fortunes improved for the soft commodities which tumbled in the last
session on fears for the Brazilian real.
In fact, fears over the Argentine peso's tumble being
repeated by other developing market currencies, but particularly the real, have
not gone away.
"The prospects for Argentina according to the financial
press are dire, with predicted prolonged domestic inflationary issues and
possible default," said Tom Kujawa, co-head of the softs department at Sucden
In sugar, "with
the 'contagion' effects towards particularly the Brazilian, Indian, Thai and
Australian currencies, the winds are firmly to the backs of the bears," he
"In summary it's incredibly difficult to be a sugar bull at
present even with fresh 3.5-4-year lows seemingly printed on a daily basis."
Still, with the Bank of India raising interest rates by 25
basis points to 8%, Turkey expected to unveil a rate increase and Brazil's
central bank forecasting rate rises across emerging markets, developing country
currencies held their ground for now, and even rebounded a touch.
That helped the likes of arabica coffee and raw sugar, of which Brazil is the top producer
and exporter, recover. A weaker real boosts the value in dollars of assets in
which Brazil is a big player, encouraging producer selling.
Arabica coffee for March added 0.7% to 114.65 cents a pound.
Raw sugar for March rebounded 1.5% to 15.02 cents a pound,
if only after setting a fresh three-year low for a spot contract of 14.70 cents
The rebound did not extend, however, to orange juice, another ag dependent largely on Brazil for supplies, which
for March ended down 0.4% at 138.70 cents a pound.
Among grains, wheat
had a mixed performance – closing up 0.4% at $5.66 a bushel in Chicago for
March delivery, but down 0.8% at E192.75 a tonne in Paris. And not for currency
The divide reflected the differing fortunes of French and US
wheat in the latest tender by Egypt's Gasc grain authority, which took its
purchases of the grain this month above 1m tonnes, as it exploits lower prices.
Purchases of 240,000 tonnes on Tuesday included 60,000
tonnes of US wheat, despite the extra transport costs of shipping across the
Atlantic rather than from the Black Sea or France.
However, French wheat did not make the cut, with Gasc
tightening restrictions on wheat with a moisture content of more than 13.0%,
catching out French supplies, which tend to have 13.5% or so.
The prospect of French wheat missing out on future Gasc
tenders was one reason for price weakness in Paris.
Another was that Gasc bought the bulk of its purchase from
Russia, stoking ideas that the provider of competitively priced supplies, on
the European Unions doorstep, might have some more shots left in its locker,
rather than being largely sold out of export markets, as many felt late last
Furthermore, the threat of winterkill in Ukraine and the
Northern Caucasus receded with snowfalls.
"This will further increase winterkill protection for wheat,
as very cold temperatures continue across the region over the next 10 days,"
But there are still worries about how US winter wheat
seedlings are coping with frost.
"Temperatures are quite cold across the Midwest and north
eastern Plains this morning, and some winterkill is indeed occurring across
west central Indiana, central Illinois, northern Missouri and far eastern
Nebraska as snow cover remains very limited," MDA said.
Signally, Chicago soft red winter wheat, grown largely in the
Midwest, outperformed Kansas City-traded hard red winter wheat, popular in the
central and southern Plains.
Kansas wheat for March eased 0.25 cents to $6.22 ¼ a bushel.
The cold is helping nearby corn prices too, in hampering logistics,
at a time when producers are anyway reluctant to sell.
"Tremendously cold weather across the Midwest continues to
support corn prices," CHS Hedging said.
soared, up 2.9% at $1.768 a gallon for March delivery, helping support ideas of
solid demand from biofuel producers, after data on Friday showing feedlots a
little more willing to put cattle on feed than investors had expected.
The US Department of Agriculture also announced the sale of
100,000 tonnes of US corn to Spain for 2013-14, underlining ideas of resilient
US export demand.
Chicago corn for March closed up 0.1% at $4.32 a bushel –
making Tuesday the sixth successive winning day for the grain.
Improved Argentine conditions
weather was less bullish, with ideas of rainfall and lower temperatures in
Argentine going some way to ease crop concerns.
"The weather conditions in South America have taken a back
seat because there is little to talk about as the wetter and cooler conditions
in Argentina the last two weeks have taken much of the uncertainty out of the
CHS Hedging said: "Dry weather is forecasted for Mato
Grasso, Brazil later this week which will aid soybean harvest."
'Rumours of China
Technically, futures remained compromised too.
"A move above $13.00 a bushel would be a bullish sign, but
traders are hesitant to push prices higher as rumours of China cancellations
continue to be a concern," said US Commodities, the cancellations being of orders
of US soybeans, now that cheaper Brazilian supplies are coming online.
Soybeans for March closed down 0.2% at $12.85 ½ a bushel,
staying above their 200-day moving averages, but struggling to get near that